Despite a strongly positive account of the ACT economy’s prospects and underlying strengths from the Chief Minister, the Canberra business community’s response to the Territory’s deficit budget has been cautious, perhaps best summarised by the sentiment that it’s acceptable provided this doesn’t become a pattern.
The chief minister was speaking to the Canberra Business Chamber’s annual post-budget breakfast after unveiling a budget that continues rate rises and infrastructure spending but heads into a modest deficit for the next two years.
He contrasted the local economy’s achievements with the national picture, noting the shift towards 62.5 per cent private sector employment, the ACT’s strength by comparison with Tasmania and the Northern Territory and our national leadership in export services.
Mr Barr said that the ACT’s share of Commonwealth revenue is historically low, but praised “once in a generation” levels of co-operation with the NSW State government on regional investment in transport, freight access and other regional economy-boosting measures.
“Thirty years into self-government, it’s very clear that we are expected to pay our own way,” Mr Barr said.
He flagged the continuing importance of tax reform although, he said, much of the heavy lifting had already been done with continuing stamp duty reform, the abolition of insurance tax and the highest payroll tax threshold in Australia and its subsequent benefits for small business.
“When the land sales are finished, how will we pay our way?” Mr Barr asked.
But while many in the business community accepted that the forecast deficits were modest and on the face of it manageable, there was plenty of caution about the government’s decision to continue investing heavily in infrastructure while raising rates.
Speaking at the breakfast, UNSW’s Professor Satish Chand cautioned that there is limited space to continue raising rates before there’s an eventual impact on the capital value of fixed assets. “The risk is that ongoing rate rises will eventually affect property prices and deflect investment across the border,” he said.
Region Media group editor Genevieve Jacobs was at the Canberra Business Chamber's annual post-budget breakfast this morning, talking to CBC president Archie Tsirimokos, CEO Dr Michael Schaper, and Andrew Sykes from RSM Australia to gauge their views on the impact the 2019 ACT Budget will have on local businesses.
Posted by The RiotACT on Tuesday, 4 June 2019
Advocating a wider use of public-private partnerships, Professor Chand said that while the ACT economy had successfully decoupled from the public service grip, there are still risks from Federal government decentralisation and downturns in the national economy. He also suggested that a Canberra balance sheet ought to value the natural environment more highly and take those values into account in urban planning.
“I think we could bottle both the air and the tap water and export it to India and China!”, he said.
Rob Tyson of Price Waterhouse Coopers also gave a granular analysis of economic growth across Canberra noting the changes in areas like Civic, which has boomed to the value of more than $6billion with the introduction of diverse development including residential. Gungahlin has slowed, while both Garran and the airport are now billion dollar local economies.
But Mr Tyson also pointed to evidence that Canberra households are vulnerable to slowed wage growth, increasing costs of living and the likelihood that the bottom of the property market was approaching, enhancing people’s anxiety about the value of their assets.
Responding to Region Media’s question, the Chief Minister said he was open to further discussions on how to remediate the effect of the rate rises on people who are asset rich but cash poor. These might include deferrals and special measures for long term residents who have not paid stamp duty for many years.